Closing costs explained
Closing costs are the one-time charges to finalize a mortgage, typically 2% to 5% of the loan amount. They fall into four buckets, and you have real leverage over one of them.
Last reviewed August 2026
The four buckets
- Lender charges: origination or underwriting fees, and any discount points you choose to buy. These are negotiable and vary by lender.
- Third-party services: appraisal, credit report, title search, lender's title insurance, settlement/attorney fee. You can shop for title and settlement in most states.
- Government fees: recording fees and any transfer or mortgage tax. Fixed by your locality.
- Prepaids and escrow: the first year of homeowners insurance, prepaid interest to the end of the month, and a few months of taxes and insurance to seed the escrow account. Not a fee — money you would owe anyway, collected early.
Compare the Loan Estimate and Closing Disclosure
Within three business days of applying, each lender must give you a Loan Estimate — a standardized form that makes offers directly comparable. At least three business days before closing you get the Closing Disclosure with final numbers. Put them side by side: lender fees and services you shopped for should not balloon, and any large change needs an explanation.
Terms in this guide
- Closing costs — The one-time fees paid to complete a home purchase or refinance — lender origination charges, appraisal, title insurance, recording fees, prepaid taxes and insurance, and escrow setup. They typically run 2–5% of the loan amount.
- Origination fee — The lender's charge for processing and underwriting the loan, often about 0.5–1% of the loan amount. It appears on the Loan Estimate and is part of both closing costs and the APR calculation.
- Title insurance — A one-time policy that protects against defects in the property's ownership history — liens, forgeries, errors in public records. A lender's policy is required; an owner's policy is optional but usually worth it.
- Loan Estimate — A standardized three-page form the lender must provide within three business days of your application, showing the estimated rate, monthly payment, and closing costs. Use it to compare competing offers.
- Closing Disclosure — The five-page form the lender must deliver at least three business days before closing, itemizing the final loan terms, monthly payment, and all closing costs. Compare it line by line against your Loan Estimate.
- Escrow account — An account the loan servicer uses to hold and pay your property taxes and homeowners insurance. You pay one-twelfth of the annual total with each mortgage payment, and the servicer disburses the bills when due. Shortfalls trigger an annual escrow adjustment.
Frequently asked questions
How much are closing costs on a house?
Typically 2% to 5% of the loan amount, so $6,000 to $15,000 on a $300,000 loan. Prepaids and escrow seeding make up a large share and vary with your closing date and local tax timing.
Which closing costs can I shop for?
In most states you can choose your own title company, settlement agent, and sometimes the surveyor and pest inspector. Lender fees are negotiable. Appraisal, recording, and transfer taxes are effectively fixed.
Can closing costs be rolled into the loan?
On a refinance, usually yes. On a purchase, generally no — though you can often get the seller or lender to cover them in exchange for a higher price or rate.